Month: June 2017

With former president Barack Obama’s climate legacy in tatters, moments ago the ex-president issued a scathing statement, slammed the Trump administration for “rejecting the future”, and that “in the absence of American leadership”, unlike the “steady, principled American leadership ” under Obama, the former president urged “states, cities, and businesses” to “step up and do even more to lead the way, and help protect for future generations the one planet we’ve got.”

“The nations that remain in the Paris Agreement will be the nations that reap the benefits in jobs and industries created,” Obama said. “I believe the United States of America should be at the front of the pack.” 

Trump announced on Thursday that the U.S would leave the 195-nation agreement, his firmest rebuke yet of Obama-era environmental policies and the fulfillment of a key campaign promise.

Statement from President Barack Obama on the Paris Climate Agreement:

 

A year and a half ago, the world came together in Paris around the first-ever global agreement to set the world on a low-carbon course and protect the world we leave to our children.

 

It was steady, principled American leadership on the world stage that made that achievement possible. It was bold American ambition that encouraged dozens of other nations to set their sights higher as well. And what made that leadership and ambition possible was America’s private innovation and public investment in growing industries like wind and solar — industries that created some of the fastest new streams of good-paying jobs in recent years, and contributed to the longest streak of job creation in our history.

 

Simply put, the private sector already chose a low-carbon future. And for the nations that committed themselves to that future, the Paris Agreement opened the floodgates for businesses, scientists, and engineers to unleash high-tech, low-carbon investment and innovation on an unprecedented scale.

 

The nations that remain in the Paris Agreement will be the nations that reap the benefits in jobs and industries created. I believe the United States of America should be at the front of the pack. But even in the absence of American leadership; even as this Administration joins a small handful of nations that reject the future; I’m confident that our states, cities, and businesses will step up and do even more to lead the way, and help protect for future generations the one planet we’ve got.

And here is Paul Ryan’s statement:

via http://ift.tt/2rpNkWk Tyler Durden

Authored by Simon Black via SovereignMan.com,

Uber reported yesterday that its NET LOSS totaled more than $700 million last quarter, despite pulling in a whopping $3.4 billion in revenue.

(This means they spent at least $4.1 billion!)

That’s the latest in a string of massive, 9-figure quarterly losses for the company.

The only question I have is– how much cocaine are these people buying?

Seriously, it’s REALLY HARD to spend so many billions of dollars.

You could have over 100,000 employees ('real' employees, not Uber drivers) and pay them $150,000 EACH and still not blow through that much money in a single quarter.

Even if you think about Research & Development, Uber still managed to burn through almost as much cash as NASA’s $4.8 billion budget last quarter.

The real irony is that this company is worth $70 BILLION.

And Uber is far from alone.

Netflix is also worth $70 billion; and like Uber, they can’t make money.

Over the last twelve months Netflix burned through over $1.7 billion in cash, and they made up for it by going deeper into debt.

The list goes on and on– Snapchat debuted with a $30 billion valuation after its IPO, only to subsequently report that they had lost $2.2 billion in the previous quarter.

Telecom company Sprint is still somehow worth more than $30 billion despite having over $40 billion in debt and burning through more than $6 billion over the last three years.

And then there’s Twitter, a rudderless, profitless company that is still worth over $13 billion.

This is pure insanity.

If companies that burn through obscene piles of cash and have no clear path to profitability are worth tens of billions of dollars, it seems like any business that’s cashflow positive should be worth TRILLIONS.

None of this makes any sense, and investing in this environment is nothing more than gambling.

Sure, it’s always possible these companies’ stock prices increase even more.

Maybe Netflix and Twitter quadruple despite continuing losses and debt accumulation. Maybe Bitcoin surges to $50,000 next month.

And maybe the Dallas Cowboys finally offer me the starting quarterback position next season.

Hey, anything could happen.

Call me old-fashioned, but I focus heavily on risk.

Remember Rule #1 in investing: don’t lose money. Rule #2? See rule #1.

It’s hard to abide by rules #1 and #2 if you buy expensive, popular investments that lose tons of money and don’t have a strategy to turn a profit.

There’s risk in EVERY investment. There’s risk in buying Apple stock. There’s risk in buying government bonds.

There’s risk in holding your money in a bank. There’s risk in stuffing cash under your mattress. There’s risk in doing nothing at all.

The idea is to invest where risk is low, while the potential for return is still high.

One of the best ways to do that is to patiently buy high quality assets for a deep discount.

Buying anything at a discount makes sense to anyone. People like discount clothes, discount cars, discount airfare.

Even in certain investments like real estate, investors look for bargains… like picking up a great home in a great neighborhood at a discount price because of the seller’s divorce or financial hardship.

But with stocks, this bias towards discounts tends to go out the window.

Granted, it’s a lot harder to find discount stocks these days given that just about EVERYTHING is in a bubble.

But if you have the right knowledge and you’re willing to put in the hard work and long hours, you’ll find hidden gems.

Do you have a Plan B?

We leave it to none other than Aswath Damodaran, infamous valuation guru and finance professor at New York University – who nailed Theranos by warning in 2015 of numerous red flags about the unicorn…

"Uber is a one-of-a-kind company, in good ways and bad ways. It’s going to be a case study… This is a cash-burning machine."

And that Mr. Damodaran is what makes it worth $68 billion!!!???

 

via http://ift.tt/2rpuazT Tyler Durden

Leucadia National CEO Richard Handler and Executive Chairman Brian Friedman sent a letter to this year's crop of Jefferies summer interns advising them that they shouldn’t linger in the office for even a second longer than is necessary. The letter, which was published by Yahoo Finance, reflects Silicon Valley’s impact on the Wall Street recruitment process – a cultural shift that has led some of the biggest investment banks, including Goldman Sachs, to bar interns from the office after midnight while encouraging them to take at least one day off over the weekend. 

Novice bankers should spend more time out enjoying New York City, the letter says, and less time competing to be the last person to leave, because securing a full-time offer at the investment bank “isn’t a zero-sum game. “If you have free time, get out of the office.  Facetime is bulls***.  We don’t want people who are proud that they have no life outside of the office.”

Interns should prioritize their health by finding time to exercise, eat well, get enough sleep – anything that helps them to keep from burning out. And while nobody should shy away from asking questions, interns should also be considerate enough to recognize when full-time staff are too busy to accommodate them.

Regardless of whether they intend to pursue a career on Wall Street, Jefferies interns hoping to get the most out of their experience should treat their internship like it’s a full-time job, not just a “try out.” Every intern should find time during the middle of a difficult task to take a step back “and THINK and UNDERSTAND what you are doing and what it means."

Here’s the letter in full:

It is that special time of year again when our Jefferies’ offices swell with super talented, ambitious, hard-working and youthful interns from college and graduate schools.  This year, we hired 163 potential future superstars from thousands of qualified candidates.  Thinking (way) back to our intern days just a few years (decades) ago, we thought we would share with all of you some of the wisdom and perspective we wish we had back then.  Yes, the financial markets, technology, and the entire world has changed tremendously since then, but we believe that the more some things may change, the more other things may stay the same.  By the way, you might not need to be a summer intern to perhaps pick up a useful tip or two.

What We Wish We Knew When We Were Summer Interns On Wall Street (Yes, a long, long time ago, but still relevant):

1. This is not an easy internship to get. You have worked really hard for many years and made many sacrifices to get to this opportunity. Give yourself a moment to congratulate yourself and be proud of your many accomplishments.

2. Be appreciative of your family, friends, mentors and all loved ones who supported you throughout your youth and helped you get to this milestone. Nobody gets here alone. You are still youthful, by the way.

3. Regardless of whether you think you just want to give finance a try, think you want a certain stamp on your resume or aren’t even sure why you were offered and accepted this internship, act from day one as if this is your chosen career and apply yourself in a manner that is reflective of someone who is striving for a 40+ year career on Wall Street. You may hate it, love it, consider it a stepping stone or just want to live in NYC for a summer… but if you treat this job as if it is the beginning of your chosen career versus a “try out,” you will get much more out of your experience. By the way, it might be the start of your 40+ year career, so why not start right!

4. This is a very demanding summer position. You will have an enormous amount of work to do and much of it will be brand new to you. It will feel at times that you are drinking from a fire hose. One of the most important things you can do while working so hard is to also take the time to step back, reflect on what analysis/task you are performing and ask yourself (and others) why you were asked to perform this analysis and what important conclusion you should be learning from the final product.  Hard work just for work’s sake is not good enough. You need to step back and THINK and UNDERSTAND what you are doing and what it means.

5. Don’t be intimidated by anyone you meet at Jefferies. We are all fathers, mothers, sisters, brothers, sons and/or daughters. We were all interns at one point in our lives and we all felt the insecurity and unease with trying to find our way in the early days of our career. We all remember the mentors that made a difference and the jerks who did not. Give everyone the benefit of the doubt and make the outgoing effort.

6. Remember that we are all incredibly busy at Jefferies, so there are times to make the effort to meet people and there are times to politely stay away and let us do what needs to be done. Pay attention and be aware and sensitive.

7. If there is one thing that will matter in your career, it is your integrity. There are no short cuts.  You will get caught. You know within your body if you are even thinking about doing something wrong.  Everyone in our industry (and all others) is judged by their character, honesty, and morality.  Embrace this reality and live by it, and you will be unstoppable.  Bend the truth or mislead by omission or commission and you may get away with it at first, but the end will be imminent and you will regret your bad decision for the rest of your life.

8. If you do make a mistake or even think you might have (we are all human), bring it to your supervisor and the compliance department immediately.  The cover-up is always worse than the crime.  People can survive and thrive after mistakes if they are handled properly.  If you dig the hole deeper, you might as well lay down in it.

9. Your career is not a zero sum game.  Your fellow interns are not your competitors.  Teamwork and getting along with your peers is as important as hard work and smarts. You never know who the peer working in the bullpen next to you may be. They may become:  Future bosses, employees, partners, clients or lifelong friends. If you help make them better, you will do better. We can extend full-time job offers to everyone in the class if you all deserve it, or none of you if you don’t. Get with the teamwork program from day 1 and live it for your entire career. You will advance faster. You will also be a lot happier.

10. We deal with big numbers and small mistakes multiplied by big numbers can create real problems, especially since the numbers all have dollar signs before them.  Accuracy is very important and you need to check and re-check your work.

11. It is OK to make a mistake and learn what you did wrong.

12. It is not OK to repeat the same mistake.

13. If you don’t understand what is being asked of you, get clarification.  It is always good to ask all the questions you need to have answered to accomplish your task.  Don’t nod and act like you know what is needed when you don’t.  You will save an incredible amount of time for yourself and have a quality work product if you ask all the questions up front.

14. Our clients are our lifeblood.  You will get exposure to them whenever possible.  Always treat them professionally and with respect.  Our future depends on them.  So does yours.

15. Our firm has made it a priority to improve the diversity of the Jefferies team.  We need everyone’s help, including yours.  You are either helping us through your actions, intentions, and behavior, or you are making it harder for us.  We will notice.

16. Be smart, thoughtful, and mature about your social media posts.  You never know who may be “following” you. (We never had to worry about this one but you do).

17. Hard work and long hours, unfortunately, go with the territory in our industry and at Jefferies.  You will be asked to make sacrifices and some days you will run out of hours to get important work done.  Here is what you should remember:

a. Sometimes you will need to make significant sacrifices to achieve objectives and it is what it is.
b. If you have free time, get out of the office.  Facetime is bull$—.  We don’t want people who are proud that they have no life outside of the office.
c. You must take care of your health. Exercise. Eat well. Get enough sleep. You must find balance, as hard as it may seem.  Prioritize.
d. If anyone at Jefferies is making unfair demands of you, we want to know – our emails are open 24/7.  We always answer our phones and our doors are also always open if there is a problem.
e. Don’t neglect your family and friends.
f. Don’t burn yourself out.
g. We fully understand balancing all of these demands is hard and unavoidable conflicts will arise.  That said, you need to work on this and we want to help.  This is important.

18. If you think you have a product, industry or geographic preference – speak up. We cannot promise we can make it happen, but we want to know and will try to accommodate as many people as possible.  There are no bad “assignments, groups, or geographies.”

19. We greatly value and work hard at our culture at Jefferies and are very proud of it.  Add to it by bringing your originality, personality, humor, passion, smarts, and hard work.

20. We are not doctors or nurses in the emergency room triage center.  We are not soldiers in the line of fire to protect the American way of life.  We are not firemen or policewomen putting their lives at risk to save innocent people.  What we are doing (while very important and personally satisfying) is not life or death and there are many other positions that are more vital to humanity.  We are just saying to work hard, be serious, but have fun and keep things in perspective.

We look forward to meeting every one of you and welcoming you as a member of our 2017 Summer Intern Class.

Rich and Brian

via http://ift.tt/2rvjDp9 Tyler Durden

The monetary problems plaguing the state of Illinois (not to mention its public pensions) have been widely documented here over the past few years, and today the rating agencies finally noticed, when in the span of a few hours, first S&P, then Moody’s downgraded Illinois to BB+/Baa3, respectively, both just one notch above junk, the lowest rating ever given to a U.S. state, as both agencies cited a long-running political stalemate over a budget shows no signs of ending.

In the first downgrade, S&P warned that Illinois is at risk of soon losing its investment-grade status, an unprecedented step for a state that would only deeper the government’s strain. Bypassing its traditional 90-day review, S&P said Illinois will likely be downgraded around July 1, when the new fiscal year begins, if leaders haven’t agreed on a budget that starts addressing the state’s chronic deficits.

In a statement, S&P analyst Gabriel Petek said that “The unrelenting political brinkmanship now poses a threat to the timely payment of the state’s core priority payments.” 

Petek’s ire was prompted by Illinois’ inability to pass a budget for the past two years amid a clash between the Democrat-run legislature and Republican Governor Bruce Rauner. The ongoing confrontation has left the fifth most-populous US state with a record $14.5 billion of unpaid bills, ravaged entities like universities and social service providers that rely on state aid and undermined Illinois’s standing in the bond market, where investors have demanded higher premiums for the risk of owning its debt, Bloomberg reported.

The S&P analyst added that “the rating actions largely reflect the severe deterioration of Illinois’ fiscal condition, a byproduct of its stalemated budget negotiations.”

In a similar statement, Moody’s said that “legislative gridlock has sidetracked efforts not only to address pension needs but also to achieve fiscal balance, allowing a backlog of bills to approach $15 billion, or about 40% of the state’s operating budget. During the past year of fruitless negotiations and partisan wrangling, fundamental credit challenges have intensified enough to warrant a downgrade, regardless of whether a fiscal compromise is reached in an extended session.”

The rating agency added that “the downgrade to Baa3 for Illinois’ GO bonds is consistent with the state’s intensifying pressure from pension liabilities; by our calculation, the state’s unfunded pension liability for its five major plans in aggregate grew 25% in the year ended June 30, 2016, to $251 billion.”

And like S&P, Moody’s kept the state on negative outlook, citing the potential for additional credit weakening “because of a continuing political impasse that has left Illinois increasingly vulnerable to adverse revenue trends and severely underfunded retiree benefit plans.”

The downgrades, which also pushed some debt backed by legislative appropriations into junk, came a day after Illinois’s legislature blew the deadline for approving a compromise budget by a simple majority. Now, it gets even more difficult as it will take a higher threshold, or three fifths majority vote in each legislative chamber, to pass anything which effectively guarantees that one month from today Illinois will be America’s first ever Junk rated state.

On Wednesday, governor Rauner, who is up for re-election in 2018, and Democratic House Speaker Michael Madigan, who controls much of the legislative agenda, faulted each other for the unprecedented gridlock. The governor also held Democrats responsible for Thursday’s rating cut.

Cited by Bloomberg, a spokeswoman for Rauner said that “Madigan’s majority owns this downgrade because they didn’t even attempt to pass a balanced budget, get our pension liability under control, and other changes that would put Illinois on better financial footing. The governor will continue working toward a truly balanced budget with changes to our system to grow jobs and provide real and lasting property tax relief.”

“Her comment is typical Rauner incompetence, and that’s too bad,” said Steve Brown, a spokesman for Madigan.

Meanwhile, as the political circus continues, Illinois’ unpaid bills are piling up. 

By June 30, the state will owe an estimated $800 million in interest and fees on the unpaid bills that have been piling up, according to estimates from Comptroller Susana Mendoza, a Democrat. She warned of “dire” consequences for residents if a budget isn’t reached by the start of fiscal year 2018 on July 1, including the shuttering of more social service providers and layoffs at public universities. With only a month to go before the start of fiscal year, the ratings cut wasn’t unexpected.

“We’re going to start to see some real pain now,” Senate President John Cullerton told reporters in Springfield on Wednesday. “We’re going to start to see downgrades. We don’t have any funding for schools. We don’t have any funding for higher end and a bunch of social programs. We don’t have a budget.”

Just like Venezuela, despite not having a budget, Illinois has dutifully continued to cover payments due on its bonds, and, like other states, has no ability to resort to bankruptcy to escape from its debts.

For now. A downgrade to junk, though, would add even more financial pressure by increasing the state’s borrowing costs and preventing many mutual funds from buying Illinois’s securities.

To be sure, today’s announcement did not come as a surprise to markets: Illinois’s 10-year bonds already yield 4.4%, 2.5 percentage points more than those on top-rated debt. That spread is the highest since at least January 2013 and more than any of the other 19 states tracked by Bloomberg. In fact, ths spread to AAA debt is now the highest on record.

Discussing next steps, Dennis Derby, a money manager at Wells Fargo which holds Illinois bonds among its $40 billion of municipal debt said “It wouldn’t be too far of a stretch at this point” to get to junk, , said in an interview before S&P’s downgrade. “I don’t know if being downgraded to junk would motivate the state to come together. You would think getting downgraded to a BBB would have motivated them and it didn’t.”

via http://ift.tt/2rvwwj8 Tyler Durden

Authored by Dave Forest via OilPrice.com,

I’ve been writing a lot the last several months about the new South Africa mining charter. And this week, that issue is coming to a head – just as some potentially bigger problems emerge for the industry in this troubled nation.

Reports last week suggested that South Africa’s government has now finalized amendments to the mining charter – policies that have been promised by lawmakers since mid-2016.

The problem is, no one has seen the changes.

South Africa’s Chamber of Mines told Bloomberg this week it hasn’t had any communications from the government on the new charter. In fact, Chamber officials said they haven’t received any notices at all since March — suggesting the government has gone to “stealth mode” in moving controversial measures forward.

Early reports suggest the amended charter will indeed be more onerous for miners. Raising black ownership targets to 30 percent, from a current 26 percent.

Such changes however, are simply speculation at this point — until the charter amendments are officially published in government gazettes. Something officials haven’t given an exact timeline for, simply saying it should happen “within weeks”.

That represents a flash-button issue coming in this critical mining nation. And other news this week suggests the government — and the country — may have even bigger problems.

The issue is growing evidence of massive mining-related corruption in the government of president Jacob Zuma. With private emails surfacing that show Zuma’s mines ministry has been greatly influenced by outside interests.

Local press leaked emails from the powerful South African Gupta family. Showing that Gupta companies were consulted on the appointment of mining minister Mosebenzi Zwane — months before his nomination was made public.

The emails show the Gupta’s questioned Zwane prior to his appointment – suggesting they were “vetting” him for suitability in office. Charges that are all the more worrisome given the group employs President Zuma’s son.

If substantiated, these messages provide strong evidence that South African mining officials have been compromised — and could lead to a complete backlash against the ministry, and its policies. Watch for more developments on potential action against these politicians, for the release of new details on the mining charter, and the ensuing reaction from miners.

via http://ift.tt/2qL1nnN Tyler Durden

While Amazon is testing drone delivery, ocean freight, (and teleportation devices, ok we made that up), WalMart has decided to take a different approach to fulfilling its online orders… employees will deliver packages on their way home from work!

As AP reports, in its latest effort to compete with online giant Amazon, Walmart is testing a delivery service using its own store employees, who will deliver packages ordered online while driving home from their regular work shifts.

The "associate delivery" program would use Walmart's 4,700 U.S. stores and roughly 1.2 million employees to speed delivery and cut costs.

 

The world's largest retailer says workers can choose to participate and would be paid. The service is being tested at two stores in New Jersey and one in Arkansas.

Walmart has stores within 10 miles of 90 percent of the U.S. population, the company says.

"Now imagine all the routes our associates drive to and from work and the houses they pass along the way," Marc Lore, CEO of Walmart's U.S. online operations, wrote on the company website.

 

Ravi Jariwala, a Walmart spokesman, said all those employees driving home represent a "very dense web" of potential delivery locations for the company.

 

Employees who want to participate will be able to use an app to specify how many packages they are willing to deliver, Jariwala said, as well as the weight and size limits on the packages. Jariwala would not provide details about how workers would be paid, but said the company would comply with all federal and state minimum wage and overtime laws.

 

…

 

The move is the latest step in Walmart's campaign to counter Amazon's online dominance. Shoppers on Walmart.com can already choose to pick up items at a nearby store for a lower price. Walmart has also revamped its shipping program and offers free, two-day shipping for online orders of its most popular items with a minimum purchase of $35.

 

In its tests so far, Walmart says "many" packages are arriving at customers' homes just a day after an order has been placed.

 

Participating employees will have to undergo background checks and will need clean driving records, Jariwala said.

All of which perhaps explains this…

Although some might question both.

via http://ift.tt/2stqRHn Tyler Durden

Just like Donald Trump during the presidential campaign, when the mere mention of his name was sufficient to boost one’s Nielsen rating by several points, so Russia’s president Vladimir Putin has, for various reason, become a media magnet over the past year. And when it comes to Putin, perhaps the most anticipated interview with the Russian leader is that of Oliver Stone, which is expected to premiere in less than two weeks on Showtime, on June 12.

So, in an attempt to share in the anticipation and borrow some of the limelight, Megyn Kelly said she has landed an interview with none other than the Russian leader for the premiere of her NBC newsmagazine Sunday. She announced the big “get” on Thursday’s “Today” show. 

According to NBC, she’s already in Russia to moderate a discussion featuring Putin at the St. Petersburg International Economic Forum, and the interview will take place afterward. They’ve been working to land the interview since Kelly agreed to serve on the panel.

Kelly left Fox News Channel for her job at NBC News, where she will also host a morning talk show starting in September.

And, as NBC adds, in the best competitive tradition, “CBS This Morning” on Thursday aired a portion of a Putin interview conducted by filmmaker Oliver Stone  which as noted above will air on CBS’ corporate sister Showtime in less than two weeks.

via http://ift.tt/2qL8SL7 Tyler Durden

Authored by Axel Merk via Axel Merk Investments,

The other day, I was asked what my investment advice for a 65-year old would be? My reply: “Go to the gym and watch your expenses.” To create wealth and/or preserve it for a future generation, all too often do we lose sight of the big picture. Let me explain.

Most of us invest because we pursue long-term goals, even if the means of achieving them differ greatly. This long-term goal tends to be saving for retirement; for those who can, it might extend to save for a future generation; or, for institutional investors, there might be an infinite investment horizon.

To serve investors, we have a massive industry paid in basis points of assets serviced or commission on products sold. In my humble opinion, our industry is ill equipped to provide advice that falls outside of those parameters. Here are a few of those:

Go to the gym. Seriously. You don’t need to be a wizard able to dissect financial statements to appreciate that your own earnings potential is the one you might have most control over. You have more income options at your disposal if you stay healthy until an old age. While there are limits as to how much we can control our health, it is an aspect of our lives that many of us could easily improve. If you want “diversification” in your portfolio, investing in your own health is something you might want to add to your list. If you manage an endowment, this may not apply, except that sending your board of directors to the gym may not be such a bad idea either.

 

Watch your expenses. Even more seriously. In an industry offering services on what to do with your hard-earned money, there is too little emphasis on reducing expenses. Businesses and people typically don’t go out of business because of a lack of revenue; they typically go out of business because their expenses are too high relative to their revenue. College students can live off barely any income, but somehow, we all pick up a boatload of recurring expenses as we grow older. The same applies to institutions: for example, donations may lead to new buildings, but those buildings need to be maintained. Most institutions, at least, have formal budget plans.

 

When an individual goes to a financial planner, they may be asked about their retirement spending habits. I allege that just as many have very little appreciation of what “risk” in a portfolio means, few know how their expenses will evolve once they retire.

 

May I propose that you analyze your current spending habits to better understand how your spending may evolve? Your current spending discipline may speak volumes about your future spending discipline. To give an example: a good fifteen years ago, I discussed spending habits with two investors: both had a family, both lived in affluent neighborhoods; one of them had about four times the income of the other one. Yet, the person with the more modest income saved more each year than the high earner. And guess what: today, the high earner continues to splurge most of his money while the more modest person has continued to prudently build his retirement nest egg.

 

There are plenty of models on how much you might be spending in retirement. Adjusting one’s expected future expenses based on a frank assessment of one’s own character might make the exercise more realistic. And the more seriously one takes the exercise of assessing one’s spending habits, the more likely it is that one can actually learn to manage those expenses.

 

Be a role model for your kids. Financially that is. If you want to save for the next generation, live by example. How can you expect your children to live within their means if you don’t? Financial education is good for everyone, including children. Let’s assume for a moment you are fortunate enough to be able to leave something for the next generation, wouldn’t you want them to also preserve the wealth for the following generation? A good starting point to raise them without feeling entitled may be to teach them about the value of money; and while a lesson on monetary policy wouldn’t hurt, such knowledge doesn’t matter if children do not understand how to keep their expenses in check. And that, in turn, may be difficult if their parents can’t do this.

What does this all mean for your portfolio?

In the context of health, expense management and being a parental role model, can one draw conclusions about what one should invest in? The one takeaway may be that investing is not about bragging rights at cocktail parties. If you can afford it and can afford the risk that comes with an investment to “show off,” I don’t have a problem with anyone investing in a pet project or going along for the ride in a tech startup, be it through private equity or a fashionable stock. Let me just guess that if you are the type to go for the hot stock tip, the fashionable idea, you may also be the type of person who fails the Marshmallow Test; coincidentally, I allege it means your long-term investment returns are more likely to be disappointing. In my view one should treat their portfolio like a serious business.

None of this is rocket science. What makes this worth writing about anyway is that I see so many people not adhere to these simple concepts. I also see many parents struggle to help their children learn about finance and to respect the value of money.

Once those basic concepts are understood, one can start talking about portfolio construction. In our industry, we differentiate between financial planners, asset allocators and portfolio managers. A do-it-yourself investor might be wearing all these hats simultaneously. To make it clear, I have nothing against do-it-yourself investors because they are engaged. I would much rather see a do-it-yourself investor who is engaged than someone who has lots of advisors, but doesn’t listen to them or manage them. Just like any outsourced relationship, hiring an investment professional requires management.

via http://ift.tt/2rJRdJ2 Tyler Durden